Angola – Towards an Energy Strategy

“We, in the International Energy Agency, have been pleased to have the opportunity to assist the government of Angola in developing a framework for your energy policy and in identifying key priorities. Angola with its well-established oil and gas reserves is a major player in world oil markets, but it is also a country of roughly 16 million inhabitants anxious to provide those citizens reliable, affordable access to the energy they need for their daily lives”, declared William C. Ramsay, Deputy Executive Director of the International Energy Agency (IEA) today in Angola’s capital, Luanda. Electricity is available to less then 20% of Angolans and most Angolans rely on wood or charcoal. “As you consolidate your successful transition to peace and democracy, the energy sector is essential to meeting the aspirations of all Angolans for higher living standards”, Mr. Ramsay added as he presented the main findings and recommendations of a new IEA publication Angola: Towards an Energy Strategy. Mr. Ramsay was addressing key delegates and officials of the Angolan government, including Deputy Prime Minister Aguinaldo Jaime whose support and participation in the review was vital to its success.

In 2005, the IEA conducted a survey of the Angolan energy sector and policies by making several visits to Angola and meeting with top energy sector officials and stakeholders. Mr. Ramsay stressed that Angola: Towards an Energy Strategy was “a truly collaborative effort”. He added that while the IEA team formed its own assessments, “We needed to understand your views on the state of energy development in the country and your plans and aspirations for the future.”

“Electricity is the leading indicator of growing prosperity and the principal driver of a modern society”, said Mr. Ramsay. Only a small percentage of Angolans have access to electricity, and service is generally unreliable. “Improving access to electricity services throughout the country is critical to Angola’s economic and human development.” The Review proposes integrated solutions which take into account both the supply and the demand side of the problems. The electricity sector requires significant investment but is not able to generate sufficient funds. Not only do tariffs not cover costs, but collection rates on bills are low. While raising tariffs is important, simply raising tariffs may in fact increase the non-payment problem if not accompanied by efforts to improve billing and collection. “A rational rate structure, metering systems and more effective collections are essential to building a viable national electricity business”, explained Mr. Ramsay.

At the same time, Angola is sub-Saharan Africa’s second largest oil producer after Nigeria. Mr. Ramsay remarked that “the review recommends that the upstream oil sector be further strengthened by ensuring that the regulatory framework provides sufficient stability for the effective execution of existing contracts and the continued attraction of foreign investment. It also encourages the Angolan government to continue its efforts to improve transparency in the management of oil revenues.” Downstream, the supply of oil products to citizens across the country presents a great challenge. It is important to create the necessary incentives for private companies to engage in national distribution and sales. “We have encouraged the continuing liberalisation of product prices, which ideally should reflect world prices, and the costs of transportation and storage infrastructure”, Mr. Ramsay added.

In contrast to the oil sector, the gas sector in Angola is particularly underdeveloped. “Opportunities are being missed”, remarked Mr. Ramsay. For this reason, “it will be particularly important for the government to present a clear gas development strategy which will make clear to potential investors what their rights and obligations are when participating in the development of the new gas industry.” Effective implementation of the government’s policy to reduce flaring not only makes economic sense but will also bring significant environmental benefits.

As for biomass, which is used as the sole source of energy for heating and cooking by some 80% of Angolans, Mr. Ramsay suggested that problems such as inefficient use of manpower, deforestation, pollution and health-hazards linked to such a high level of traditional biomass consumption, be tackled within the wider framework of government policy. “Rationalizing traditional biomass use is one area requiring very close co-ordination between many government departments.”

Finally, the report suggested that the Angolan government improve its capability to collect, analyse and disseminate relevant statistics in the energy and related sectors, pointing out that policy making would also be strengthened by greater data sharing between government departments. “In this endeavour, the Angolan government may wish to seek the assistance of international institutions”, said Mr. Ramsay. “We, in the International Energy Agency, would be pleased to help.”

In conclusion Mr. Ramsay offered his support and hopes for the future of Angola. “We hope you find our perspectives useful. We also hope that the depth of analysis we have provided here will help the wider international community, including potential investors and financial institutions, to understand better the opportunities and challenges you face here in Angola and to offer their assistance.”